Crypto VC Investment Expected to Increase This Year but Stay Below Record Levels: JPMorgan

Crypto Startups to See Boost in Venture Funding, But 2021 Highs Unlikely: JPMorgan

Crypto venture capital (VC) funding is set to rebound in 2025 as regulatory clarity improves under President Donald Trump’s administration and Europe’s newly implemented MiCA regulations, according to a JPMorgan (JPM) research report released Wednesday.

The report noted that regulatory uncertainty and aggressive enforcement actions by the U.S. Securities and Exchange Commission (SEC) during the previous administration created a challenging environment for crypto startups seeking venture capital. However, recent policy shifts and clearer regulations are expected to reignite investor interest.

The implementation of the EU’s Markets in Crypto Assets (MiCA) framework is likely to further encourage venture capital engagement, the report said, providing a much-needed boost for the sector.

Despite the expected recovery, JPMorgan warned that VC funding levels may not reach the record highs seen during the 2021-2022 crypto bull market. This is due to rising competition from traditional financial giants like BlackRock (BLK) and Franklin Templeton, which are increasingly active in areas like stablecoins, decentralized finance (DeFi), and tokenization, the report added.

Emerging projects are also steering away from large token sales to venture capitalists, instead choosing community-driven funding mechanisms, which limit VC participation in early-stage opportunities.

High interest rates and the rise of crypto exchange-traded funds (ETFs) as a preferred investment vehicle are additional factors putting pressure on venture capital inflows, JPMorgan said. ETFs have drawn billions in inflows, offering passive exposure to the crypto market and reducing the need for active investment in startups.

Nevertheless, the report remains optimistic about the crypto industry’s prospects in 2025, with increased regulatory clarity and the growing mainstream adoption of digital assets creating a fertile environment for innovation and growth.